Against the Gods: The Remarkable Story of Risk

Chapter 6

Considering the Nature of Man

In just a few years the commanding mathematical achievements of Cardano and Pascal had been elevated into domains that neither had dreamed of. First Graunt, Petty, and Halley had applied the concept of probability to the analysis of raw data. At about the same time, the author of the Port-Royal Logic had blended measurement and subjective beliefs when he wrote, “Fear of harm ought to be proportional not merely to the gravity of the harm, but also to the probability of the event.”

In 1738, the Papers of the Imperial Academy of Sciences in St. Petersburg carried an essay with this central theme: “the value of an item must not be based on its price, but rather on the utility that it yields.”1 The paper had originally been presented to the Academy in 1731, with the title Specimen Theoriae Novae de Mensura Sortis (Exposition of a New Theory on the Measurement of Risk); its author was fond of italics, and all three of the italicized words in the above quotation are his.a So are all those in the quotations that follow.

It is pure conjecture on my part that the author of the 1738 article had read the Port-Royal Logic, but the intellectual linkage between the two is striking. Interest in Logic was widespread throughout western Europe during the eighteenth century.

Both authors build their arguments on the proposition that any decision relating to risk involves two distinct and yet inseparable elements: the objective facts and a subjective view about ...